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Property II
University of Dayton School of Law
Reilly, Tracy

CONTRACTS FOR THE SALE OF LAND

The Process
1. Contract for sale & purchase
2. Inspection & verify title
3. Obtaining financing
4. Closing or “settlement”
5. Recording of deed & mortgage

—— A. Real Estate Brokers/Agents

1. Types of Listing Contracts (between Seller & Broker)
1. Open Listing
· the broker receives commission only if she sells* the property
· seller can sell property himself
· seller can enlist other brokers to try to sell the property
2. Exclusive Listing
· seller has contract exclusively with broker for a certain time
· seller may still sell* the property himself à no commission for broker
3. Exclusive Right to Sell Listing
· seller has contract exclusively with broker for a certain time
· broker gets commission as long as there is a sale* during that period

*in most listing contracts, broker receives commission not only if there is a “sale” but upon the happening of other events as well …

SAMPLE AGREEMENT (exclusive right to sell)
Seller agrees to pay Broker ___% commission upon the happening of any of the following:
(a) if during the term of the listing, Seller, Broker, or any other person:
(1) sells the property
(2) finds a Buyer who is ready, willing, and able to purchase the property
at the above price and terms (or any other terms Seller agrees to
accept)
(3) finds a Buyer who is granted an option to purchase, or lese with option
to purchase and the option is subsequently exercised
(b) if this agreement is revoked by Seller
(c) if Broker is prevented in closing the sale by existing claims, liens, etc pending
against property
(d) if Broker is unfairly hindered by Seller in the showing of or attempting to sell
the property
(e) if within _____ days after expiration of this contract, seller sells property to
any person found during the term of this listing, or due to Broker’s efforts or
advertising, unless property is listed with another broker

2. When is “ready, willing, & able”?

MAJORITY RULE: the instant the buyer signs a contract with the seller, even if
the sale is not co

its beneficiary

—— B. Types of Contracts

1. Earnest Money Contract (aka Short-Term Contract)
· executory period: typically 30-90 days
· during this time: buyer examines title & condition of property, gets mortgage, etc
· buyer takes possession: at closing of contract (=sale)
· buyer gets title: at closing of contract

2. Installment Land Contract
· executory period: typically 10-25 years
· during this time: buyer makes monthly payments to owner
· buyer takes possession: immediately upon signing the contract
· buyer gets title: at closing of contract (end of 20-35 year period)

· forfeiture provision: upon default, the seller may recover possession, keep payment received as liquidated damages, and retain title free from any rights the buyer had under the contract (policy: freedom of contract)
note: this is also a mortgage substitute